London pre-open: Stocks seen lower as Brexit talks resume

Michele Maatouk WebFG News | 09 Nov, 2017 07:33 - Updated: 07:37 | | |

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London stocks were set for a weaker open on Thursday as investors digested the latest inflation figures out of China and eyed the resumption of Brexit talks.

The FTSE 100 was expected to open 16 points lower at 7,513.

China’s consumer price index and producer price index came in at 1.9% and 6.9% respectively in October, versus consensus estimates of 1.8% and 6.6%.

Oanda analyst Craig Erlam said: “Higher fuel costs and a moderation in pork price declines was primarily responsible for the higher inflation reading, both of which can be very volatile.”

As far as the Brexit talks are concerned, Erlam said: “I doubt many are optimistic on progress given how previous meetings have gone. Time is fast running out for both sides to agree to move onto transition and trade talks before businesses begin planning for no deal worst case scenario.

“This would be particularly problematic for the UK so any sign that we’re headed in this direction could be bad for the pound. It will be interesting to see how vulnerable sterling is to these talks over the next couple of days.”

Investors were also mulling over the latest data from the Royal Institution of Chartered Surveyors, which showed house prices were down in four areas of the country in October, with London, the South East, East Anglia and north-east England all showing declines.

Simon Rubinsohn, RICS chief economist, said: "The combination of the increased cost of moving, a lack of fresh stock coming to the market, uncertainly over the political climate and now an interest rate hike appears to be taking its toll on activity in the housing market.

"With both buyer enquiries slipping and sales expectations also subdued, the sense is that home owners are staying put and first time purchasers are increasingly focusing on that part of the market supported by the Help to Buy incentive. A stagnant second-hand market is bad news for the wider economy, not just in terms of spending but also because it restricts mobility."

Still to come on the data front, Deutsche Bank was looking forward to a slightly busier day for data Germany trade data for September, UK industrial production for September and US initial jobless claims and wholesale inventories due.

In corporate news, Sainsbury's reported slowing sales in the second quarter as it unveiled a 9% fall in underlying profits for the first half of the year, though this was largely as expected.

Like-for-like sales excluding fuel increased 1.6% in the 28 weeks to 23 September, down from 2.3% in the first quarter, though the supermarket group said it was extracting more costs than it previously guided and expects full year profits in line with consensus forecasts.

Europe-focussed bottling giant Coca-Cola HBC updated the market on its third quarter trading , reporting “excellent” revenue performance, with FX-neutral revenue growth of 6.0%.

The company, which bottles brands of the Coca-Cola Company in a number of territories, added that it was a “strong” quarter for volume growth, up 3.4%, with broad-based improvements from all of its segments.

CLS Holdings has acquired Columbia Bracknell, a multi-let office property in Bracknell, Berkshire, for £14.7m excluding costs, it announced on Thursday. The firm said the property comprises 54,291 square feet of office space which, with an occupancy rate of 79%, currently generates an annual rental income of £0.88m, and a net initial yield of 5.6%. Once fully let, CLS said it is expected to produce £1.17m per annum, reflecting a net initial yield of 7.5%.

Rolls-Royce said financial performance for 2017 is on track despite continued weak demand in the offshore oil and gas market. The engine maker said it was making good progress in attempts to turn around its business and that its strategy remained intact.

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